How to Back Out Sales Tax From Total

Sales tax is a consumption tax applied to the sale or lease of goods and certain services within the United States. It is typically a percentage of the purchase price and is added to the final cost a consumer pays. Sales tax is imposed at the state and local levels, meaning there is no federal sales tax. Businesses collect this tax from customers and then remit it to the appropriate tax authorities, usually monthly, quarterly, or annually, depending on their sales volume.

There are various reasons why one might need to separate the sales tax from a total amount. For businesses, accurately backing out sales tax ensures proper accounting, distinguishing between revenue from sales and tax collected on behalf of the government. Individuals might perform this calculation to understand the original price of an item for budgeting, expense tracking, or comparing prices without the tax component.

The Core Calculation Method

The fundamental approach to backing out sales tax from a total involves a specific mathematical formula. The total amount paid already includes sales tax, so this calculation helps determine the original price before tax.

To perform this calculation, you first need two pieces of information: the total amount paid (which includes the sales tax) and the sales tax rate. The sales tax rate is typically expressed as a percentage, such as 6% or 8.5%. It is important to convert this percentage into its decimal equivalent for the formula. For example, a 6% sales tax rate becomes 0.06, and an 8.5% rate becomes 0.085.

The formula to find the original price is: Original Price = Total Amount / (1 + Sales Tax Rate as a Decimal). The sales tax amount is then found by subtracting the original price from the total amount paid: Sales Tax Amount = Total Amount – Original Price.

Practical Application and Examples

Consider a situation where a consumer pays a total of $106.00 for an item in an area with a 6% sales tax rate. To find the original price, convert 6% to 0.06. The calculation would be $106.00 / (1 + 0.06), which simplifies to $106.00 / 1.06, resulting in an original price of $100.00. The sales tax amount is then $106.00 – $100.00, equaling $6.00.

Another example might involve a higher combined sales tax rate, common in many jurisdictions where local taxes are added to state taxes. Some areas can have combined rates exceeding 9%, with Louisiana having one of the highest average combined state and local sales tax rates at 10.11% as of mid-2025.

If a total payment was $218.22 in an area with a 9.1% sales tax rate, first convert 9.1% to 0.091. The original price would be $218.22 / (1 + 0.091), or $218.22 / 1.091, which equals approximately $200.02. The sales tax paid would be $218.22 – $200.02, resulting in $18.20.

When dealing with currency, rounding practices are important. It is generally accepted to round to two decimal places, representing cents. If a calculation results in more than two decimal places, standard rounding rules apply: round up if the third decimal place is five or higher, and round down if it is four or lower. For example, $100.025 would round to $100.03.

This calculation is useful for businesses managing their financial records, as sales tax collected is a liability that must be remitted to the government, not part of the business’s revenue.